Ratio Analysis A. Price/earnings: measures the ratio of market price to earnings per share. P/E = Price per share / earnings per share. An investor has determined that
a reasonable P/E for company’s stock is $15. The earnings per share for a company is projected at $2 per share. What is a reasonable price for the stock? B. Price/free
cash flow: uses operating cash flow which is net of any new investment or cash remaining after satisfying capital expenditures. C. Price/sales: this ratio is valuable
for companies having no earnings to report.
